It’s now the third consecutive week where GDT Price index has been on the rise, first we saw that robust price increase before yesterday increase-12.2% to be precise and then yesterday’s reading-further rise of 7.7% with milk powder prices especially rising by 3.3%. The kiwi didn’t react much to it but it somehow accelerated its gain against the greenback which had taken an earlier beating and breaking above the 0.74 barrier by the weak ISM Non-Manufacturing PMI-came in worse at 51.4 against 55.4e.
As stated earlier, any break above the 0.74 price level will signal change of tact and price now will target the next price level at 0.77-which is a conspicuous support found at the weekly chart. If you may, there was a strong break out from the daily resistance trend line and yesterday’s average went above the 100 pip mark against the average of 80 pips for the past 5 days. These streams of fundamentals supporting the NZD came in again when we saw manufacturing sales for the second quarter increasing by 2.2%, clearly showing inflatory signs and supporting Graeme Wheeler ambitions of a 1.5% annual inflation target.
Today, we just follow the trend-we buy at all pullbacks below the 0.742 mark and specifically if price retraces and touches the Friday’s NFP highs, that will be good buying zone. Our next target for this rally will come in at 0.77, where there is immediate resistance.
Recommended Trade plan for today:
Buy Limit: 0.737-0.742(50 pip range zone where price could retrace to within the 68.2-100 Fibonacci Hi-Lo)
SL: 0.733, 40 pips on the lower side
TP: 0.77-on the long term, a risk reward ratio of 1:3 is recommended
Take note that, there is however a strong sell signal in the 1HR chart with the formation of that inverted hammer and stochastics trending in the overbought zone, though it has not been confirmed by the follow through candle. So, watch out keenly. Remember, Wednesdays are usually reversal days. So, we wait and see what happens.
Have a good trading day.